M&G PLC
20 September 2023
20 September 2023
M&G plc half year 2023 results
GOOD OPERATIONAL AND FINANCIAL PERFORMANCE WITH PROGRESS AGAINST CORE STRATEGIC PRIORITIES
| Net client flowsexcl. Heritage £0.7bn HY 2022: £1.2bn | Adjusted Operating Profit £390m HY 2022: £298m | Operating Capital Generation £505m HY 2022: £433m | Dividends per Share 6.5p HY 2022: 6.2p | ShareholderSolvency II ratio 199% FY 2022: 199% |
Andrea Rossi, Group Chief Executive Officer, said:
“Today’s results demonstrate the underlying strength of our business model, the resilience of our balance sheet, the attractiveness of our propositions as well as the hard work and commitment of our colleagues to deliver for our clients and execute on our strategic ambitions.
“Against the backdrop of ongoing market volatility and uncertainty we have made progress against all three pillars of the strategy that we launched in March – maintaining our financial strength through capital discipline; mobilising the Transformation programme to simplify our business and improve client outcomes; and delivering growth with positive net client inflows.
“As we look ahead, I remain confident we have the right ingredients for success that will enable us to continue to deliver attractive outcomes for our clients and shareholders. We are, however, not complacent and will continue to focus on ensuring that our balance sheet remains strong and we deliver on our purpose and strategic objectives.”
Growth
| – | Positive net client flows, excluding Heritage, of £0.7 billion (30 June 2022: £1.2 billion). Net flows remain positive into a third consecutive year despite known headwinds from UK institutional clients. |
| – | Gross inflows to PruFund UK of £3.3 billion (30 June 2022: £2.5 billion) are the highest for a six-month period since 2019. The launch of all PruFund solutions on our M&G Wealth Platform will support further reach of propositions and underpin flows in H2 and beyond. |
| – | Re-entered the Defined Benefit pension market through two targeted deals with a combined premium of £617 million which maximise the synergies of our business model and provide a third avenue of growth along with Asset Management and Wealth. |
| – | Further momentum in Wholesale Asset Management with net client inflows of £1.3 billion (30 June 2022: £0.8 billion) and continued strong investment performance. As of 30 June 2023, 70% of our mutual funds ranked in the upper two performance quartiles over one year (31 December 2022: 68%) and 71% over three years (31 December 2022: 67%). |
| – | Net client inflows of £0.7 billion in Private Markets; a core area of our Asset Management business accounting for c. 40% of total revenues, with resilient flows and attractive average margins of 55 bps. |
| – | Expected redemptions from UK clients as a result of the mini budget with net client outflows of £1.4 billion (31 December 2022: outflows of £0.7 billion) in Institutional Asset Management business but encouraging progress with positive net flows in Europe and the in-housing of a £5.5 billion Asian mandate from the internal client. |
Transformation and Simplification
| – | Good momentum in the first phase of our Transformation programme, creating a leaner and more efficient organisation and improving our ability to serve clients, reduce costs and unlock growth. |
| – | Cost savings initiatives are expected to deliver a £50 million reduction on our 2023 cost base. |
| – | Completion of voluntary redundancy scheme with approximately 200 colleague exits in the final quarter of 2023 and early 2024. |
| – | Appointment of Clive Bolton (CEO, Life Insurance) and Caroline Connellan (CEO, Wealth), who alongside Joseph Pinto (CEO, Asset Management), now provide dedicated leadership for each of our three business areas. |
Financial strength
| – | Adjusted operating profit before tax of £390 million up 31% (30 June 2022: £298 million), reflecting the strength of our diversified businesses. |
| – | IFRS profit before tax of £75 million (30 June 2022: IFRS loss before tax of £1,143 million) following a reduction in losses in short-term fluctuations in investment returns. |
| – | Operating capital generation of £505 million up 17% (30 June 2022: £433 million), with a strong underlying contribution of £352 million (30 June 2022: £386 million) and higher management actions. |
| – | These results demonstrate our continued focus on proactively managing our capital base as we remain on track to generate our target of £2.5 billion operating capital generation by December 2024 – 18 months into this three-year period we have delivered 53% of the target. |
| – | Shareholder Solvency II coverage ratio remained strong, and above the top end of our target range, at 199% (31 December 2022: 199%) and our balance sheet remains conservatively positioned, as we experienced no defaults in the first half of the year. |
| – | The interim ordinary dividend of 6.5 pence per share is up 5%. This means that since listing in 2019, M&G will have returned over £2.5 billion to shareholders. The dividend is payable on 3 November 2023. |
Outlook
| – | Our focus is to continue the good progress we have made over the last six months in transforming M&G. | |
| – | M&G is well positioned to navigate the current uncertain economic climate due to its diversified business model, international footprint, compelling products and services, investment capabilities and expertise. | |
| – | Our results for the first half of 2023 underpin our confidence in the delivery of our strategic objectives and financial targets. | |
| – | We continue to focus on our programme of business simplification and transformation, aligned to client-driven values, which will unlock growth and enable us to invest selectively, focusing our disciplined approach to capital allocation. | |
| – | We remain on track to achieve our operating capital generation target of £2.5 billion by 2024, and we are making good progress on our 2025 financial targets: | |
| – | Generate £200 million of cost savings, gross of inflation; | |
| – | Reduce core Asset Manager cost to income ratio to sustainably lower than 70%; | |
| – | Deliver increased adjusted operating profit from Asset Management and Wealth to more than 50% of the Group total, excluding Corporate Centrei; and | |
| – | Reduce our leverage ratio to below 30%. | |
| – | Our dividend policy of delivering stable or growing dividends to our shareholders remains unchanged. | |
i Based on IFRS 4 Insurance Contracts and financial segmentation as relevant at the time of the 2022 full year results.
| For the six months ended30 June | For the year ended 31 December | ||
| Performance highlightsi | 2023 | 2022 | 2022 |
| Adjusted operating profit before tax (£m)ii | 390 | 298 | 625 |
| IFRS profit/(loss) after tax (£m)ii | 75 | (1,143) | (2,055) |
| Assets under management and administration (£bn) | 332.8 | 348.9 | 342.0 |
| Net client flows (excluding Heritage) (£bn) | 0.7 | 1.2 | 0.3 |
| Operating capital generation (£m) | 505 | 433 | 821 |
| Total capital generation (£m) | 73 | 24 | (397) |
| Shareholder Solvency II coverage ratio (%) | 199% | 214% | 199% |
i Definitions of key performance measures are provided in the Supplementary information section of the Interim Financial Report.
ii Comparative numbers restated as a result of the introduction of IFRS 17 (Insurance Contracts) and IFRS 9 (Financial Instruments).
Enquiries:
| Media | Investors/Analysts | ||
| Irene Chambers | +44(0)7825 696815 | Luca Gagliardi | +44(0)20 8162 7307 |
| Irene.Chambers@mandg.com | Luca.Gagliardi@mandg.com | ||
| Ben Davies | +44 (0)20 8162 2174 | ||
| Ben.Davies@mandg.com |